In 1994-95, 96% of non-agricultural private sector businesses in Australia had fewer than 20 employed people. These businesses contributed almost one third of non-farm industry gross production.

Small business is acknowledged as a vital and significant sector of the Australian economy1, with the vast majority of private sector businesses in Australia being small businesses. In 1994-95, 96% of non-agricultural private sector businesses had fewer than 20 employees. These 781,000 small businesses employing some 2.5 million people (33% of the workforce) contributed one third of non-farm industry gross production.A further 3% of the workforce (246,000 people) were employed in some 101,500 small farming, forestry and fishing businesses in 1994-95. These businesses, mostly farm businesses operated as family concerns, have been excluded from this review because the nature of their business operations is different from businesses in the non-agricultural sector, and data about the two sectors is collected differently.

THE STRUCTURE OF AUSTRALIAN SMALL BUSINESS, 1994-95

Source: Small Business in Australia (cat. no. 1321.0).

Small business over the last decadeBetween 1983-84 and 1994-95, total employment in the non-agricultural private sector increased by 1.3 million, with small businesses accounting for half of this growth. Over the period 1983-84 to 1992-93, small businesses increased their share of non-agricultural private sector employment from 44% to 47%. By 1994-95, however, this proportion had declined to 45%, indicating small businesses did not recover to the same extent as larger businesses from the last recession.

In 1994-95, three quarters of small business employment occurred in the service industries (that is, industries other than mining, manufacturing and construction). This is slightly higher than the corresponding figure for businesses with 20 or more employed people (71%). Industries with the largest small business employment were retail trade (507,000), property and business services (378,000), and construction (362,000). The construction industry had the largest number of small businesses. However, because the average size of small businesses in the construction industry was smaller than those in other industries, it was not the largest in terms of employment.

Over the period 1983-84 to 1994-95, the greatest growth in the number of small businesses occurred in the property and business services sector (an increase of 68,000), with small businesses in the construction industry also showing strong growth (up by 50,000). Small businesses in these industries also outperformed other industries in terms of employment growth. While retail trade remains the largest employer among small businesses, growth over the period has been weak, with a small increase in employment and a decline in the number of businesses.

Although small in employment terms, the most rapidly expanding area of small business activity occurred among businesses providing education products and services; this sector experienced employment growth of 86% between 1983-84 and 1994-95. This was closely followed by businesses providing health and community services (81%). Other rapidly growing industries were property and business services (68%) and mining (64%).

SMALL BUSINESS EMPLOYMENT(a) BY INDUSTRY

1994-95

Employment

Growth, 1983-84 to 1994-95

Businesses

Total

Women

Average business size(b)

Businesses

Employment

Industry division

'000

'000

%

no.

'000

'000

Production/construction

215.0

610.4

22.1

2.8

71.1

164.6

Mining

2.5

9.5

14.7

3.8

1.0

3.7

Manufacturing

62.8

238.9

31.2

3.8

20.0

40.6

Construction

149.7

362.0

16.2

2.4

50.1

120.3

Service industries

557.6

1 845.5

47.8

3.3

159.4

457.8

Wholesale trade

50.0

216.0

33.7

4.3

8.1

46.2

Retail trade

134.7

506.9

45.7

3.8

-5.9

24.0

Accommodation, cafes and restaurants

25.4

148.4

55.9

5.8

6.1

34.6

Transport and storage

44.1

123.0

23.7

2.8

5.1

25.8

Finance and insurance

20.7

50.7

47.3

2.4

8.4

15.6

Property and business services

131.4

377.9

46.2

2.9

68.1

152.9

Education

15.6

43.6

69.7

2.8

8.2

20.2

Health and community services

53.5

178.1

69.1

3.3

29.8

79.5

Cultural and recreational services

27.2

71.4

52.8

2.6

8.4

17.6

Personal and other services

55.0

129.5

57.8

2.4

23.1

41.4

Total(c)

780.7

2 470.1

41.3

3.2

236.1

631.4

(a) Includes own account workers, employers and employees.(b) Average employment per business.(c) Includes the electricity, gas and water supply and communication services industries.

Source: Small Business in Australia (cat. no. 1321.0).

Families in small businessVery small businesses, that is, those involving fewer than five people, accounted for 85% of the total number of small businesses in 1994-95. Of this group, there were 428,000 non-employing businesses, run by 640,000 operators, and 239,000 employing businesses.

Many non-employing businesses, if not operated by a sole proprietor, are run as family concerns. Many employing businesses are also managed by family concerns but the involvement of family members as joint proprietors tends to decline as the size of the business increases. Only 6% of employing businesses with fewer than five people employed did not involve proprietors from the same family but among small businesses with between 5-19 workers, this proportion increased to 17%.

PROPRIETORS OF EMPLOYING BUSINESSES, JUNE 1995

Proportion of businesses with:

One proprietor only

No proprietors from the same family

Proprietors from the same family(a)

Size of business (employment)

%

%

%

Small

1-4

47.0

6.0

47.0

5-19

23.6

16.9

59.5

Large

20-199

28.2

27.6

44.3

200+

43.8

35.1

21.1

(a) Includes businesses with some proprietors from another family.

Source: Industry Commission and Department of Industry, Science and Tourism (1997) A Portrait of Australian Business: Results of the 1995 Business Longitudinal Survey.

Women in small businessIn 1994-95, one million women worked in small businesses representing 41% of all people occupied in small business. More than half of the women were employed in three industries: retail trade, property and business services, and health and community services. Women predominated in several service industries, particularly those undergoing rapid expansion. They were heavily outnumbered by men, however, in the goods-producing sector.

Most women (70%), including those who worked as salaried directors of companies, worked in small businesses as employees. The remaining 30% (310,000 women) were involved in running small unincorporated businesses. In 1994-95, 206,000 women worked as own account workers in non-employing businesses and 104,000 were involved in running unincorporated businesses with employees. Many of these two groups of women were in partnerships where their contribution to running the business was not determined.

In 1994-95 women represented nearly 33% of people working in their own unincorporated business (up from 30% in 1983-84). The average annual growth rate of women working as small business owners over this period was 3.3%. This compares to an average annual growth rate of men working as small business owners of 2.1%.

Small business operatorsThe Characteristics of Small Business Survey, conducted in February 1995, provided details of own account workers, employers, and working directors of incorporated companies. These people, including those who worked in partnerships, were collectively classified as small business operators. By virtue of their status as owners and directors many of these people would be involved in key business decision making processes. Some, however, who were members of a partnership would have spent most of their time doing other work for the business.

When compared to the workforce as a whole, a far lower proportion of small business operators were aged under 25 (4% compared to 20%) and the proportion in the 25-35 year age group was also lower. Taken together, 75% of small business operators were aged 35 years and over compared to 54% of all employed people. This may reflect the need to build both capital and expertise before operating one's own business.

The occupational profile of female operators differed from that of men. Female operators were more likely to work as clerks and sales and personal service workers and less likely to work as managers and administrators or professionals. Part of this difference may be associated with the fact that many women operators work as minor partners (often with husbands) in the business. It appears from the differences in occupations that they may often work in complementary roles in running the business.

Most (71%) small business operators worked at their business on a full-time basis, but the pattern was quite different for male and female operators. 86% of male operators worked full time compared to 44% of female operators. The proportions working full time were also lower than for the workforce as a whole, where 76% of employed persons (90% of males and 58% of females) work full time.

For women especially, operating their own business may offer greater flexibility to combine work with other responsibilities. In 1995, there were an estimated 301,000 home-based small business operators, that is where the operator usually worked more hours at home than away from home. While 33% of female small business operators were home based, only 19% of male small business operators were home-based.

Many small business operators work long hours. Of those small business operators who worked full time, 40% worked 51 hours per week or more, compared to about a quarter of the full-time workforce. Nearly 8% worked 75 hours or more.

Pay and benefits for small business employeesIn 1995, 62% of persons occupied in small business were employees. Employees in small businesses received lower earnings than their counterparts in larger businesses. The median weekly total earnings of full-time private sector employees (excluding managerial staff) in May 1994 was $539, compared to $480 for small business employees. While employees in small businesses worked on average 2% less hours than employees overall, they received 13% less pay. In terms of hourly earnings, employees in small businesses earned, on average, 12% less than the average amount earned by employees across all businesses.

In addition to wages and salaries, employees commonly receive various benefits in return for their labour. The Employment Benefits Survey, last conducted in August 1994, provides details of employees who worked in small and large workplaces. Not all employees in small locations (fewer than 20 employees) worked for small businesses. Some small locations are part of larger businesses. Given that employment benefits are more likely to be determined by the size of the business than the size of the location, differences in conditions of service between employees of small business and those of larger businesses could well be more marked than the following statistics indicate.

Full-time employees at locations with less than 20 employees were less likely to have superannuation cover than their counterparts in larger locations (88% compared to 96%). The difference was greater for small businesses with less than 10 employees. Thus, among locations with 10-19 employees, 92% of full-time employees had superannuation cover while among those at locations with fewer than 10 employees the proportion was 87%.

Full-time employees at small locations were also less likely to receive holiday leave, sick leave or long service leave. For instance, only 77% of those employed in locations with fewer than 10 employees received holiday leave compared to 95% of those in locations with 20 or more employees. Although enjoyed by only a minority of full-time employees, those at small locations were more likely to receive assistance with the cost of day-to-day travelling and telephone expenses.

EMPLOYMENT BENEFITS OF FULL-TIME EMPLOYEES, AUGUST 1994

(a) Small locations employ less than 20 employees, larger locations employ 20 or more staff.

Source: Employment Benefits, Australia (cat. no. 6334.0.40.001)

Trade union membershipDifferences in rates of pay and other work conditions between employees in small and large businesses may reflect differences in the skills of employees and the stability and profitability of the businesses. However, they may also reflect differences in the influence of trade unions. In 1995, the representation of trade union members in small businesses was substantially less than in larger businesses. Only 9% of businesses with fewer than 20 employees had a union member among their employees, compared to 42% of businesses with 20 or more employees.

TRADE UNION MEMBERS IN BUSINESSES, JUNE 1995

None

Less than half of employees

Half or more of employees

Size of business (employment)

%

%

%

Small

1-4

92.4

4.2

3.4

5-19

87.3

7.9

4.9

Large

20-199

60.6

27.0

12.4

200+

21.2

40.9

38.1

Source: Industry Commission and Department of Industry, Science and Tourism (1997) A Portrait of Australian Business: Results of the 1995 Business Longitudinal Survey.

Endnotes1 Howard, J. Hon. 1997, More Time for Business, Statement by The Prime Minister, The Hon. John Howard MP, 24 March 1997, AGPS, Canberra.

Unless otherwise noted, content on this website is licensed under a Creative Commons Attribution 2.5 Australia Licence together with any terms, conditions and exclusions as set out in the website Copyright notice. For permission to do anything beyond the scope of this licence and copyright terms contact us.